Fashion is one of those industries in which Britain is still a leading world power.

About 131,000 people work across the designer fashion industry in Britain and the National Endowment for Science, Technology and the Arts has calculated that, from 2009 to 2013, creative industries — including fashion — will grow by an average of 4 per cent a year. That is more than double the rate at which the rest of the economy is expected to grow.

There are plenty of examples of how Britain’s fashion industry punches above its weight on the world stage. Burberry, recently elevated into the ranks of the FTSE 100 index, is one of the world’s biggest fashion brands, while many of our designers — such as John Galliano, at Dior — have been sought out by fashion houses elsewhere in the world.

Meanwhile, London Fashion Week is firmly established as one of the global fashion industry’s key annual events, rivalling similar events in Paris, Milan and New York. This is despite London, once regarded as brimming with edgy, avant-garde talent, losing many of its best-known designers — including Mr Galliano, Alexander McQueen and Stella McCartney — to Paris and Milan in recent years. This is proof that Britain’s fashion schools are still turning out some of the most innovative people in the industry.

At the same time, other designers from around the world have sought to ply their trade in Britain, such as the French-born Nicole Farhi, who recently described London as “the birthplace of fashion today”.

It isn’t just at the luxury end of the market that Britain is turning out some of the key players on the global fashion and designer stage. At a mass level, too, Britain is doing well. Topshop, Sir Philip Green’s high street fashion empire, opened its first store in New York this year and the billionaire retailer is now mulling openings elsewhere in the world, including Milan and Paris.

Yet the industry has been through a tough recession. Getting on for 18 per cent of the UK’s fashion retailers have gone bust during the recession and, while that has allowed the survivors — such as Marks & Spencer, Primark, Next and Sir Philip’s Arcadia — to continue to increase their market share, it has cast a shadow.

One issue that has hit retailers, in particular, has been the reluctance of credit insurers to do business in the sector. In many cases, these firms have withdrawn their cover, leaving suppliers nervous and exposed.

Life has also been particularly difficult for those fashion retailers who were previously owned by Icelandic companies. Mosaic Fashions, whose stable of clothing brands included Principles and Karen Millen, was broken up after its main shareholder, Baugur, collapsed.

A number of otherwise solid businesses found themselves caught in the crossfire and having to spend time in Iceland sorting out their banking arrangements instead of getting on with their regular work. The fashion chain All Saints, for example, came close to going to the wall despite having shown 40 per cent year-on-year growth. It was forced to spend time calming the fears of its suppliers, who were concerned about its banking arrangements. With new banking arrangements in place, All Saints survived the turmoil and is now expanding.

Other examples of British fashion ingenuity abound. Asos, the online fashion retailer, has come from nowhere in recent years to become a big player in the industry and has shown how the internet can be profitably harnessed.

In this, the latest in our fortnightly series of reports mapping the British business landscape, we examine just how the fashion industry is coping with the downturn — and how it expects to grow once the UK has pulled out of recession.